On Mar 12, 2013, at 11:08 AM, Steve Bruns <sdbruns at telus.net> wrote:
> "That is the missing ingredient from both the analysis of Sachs and his Keynesian opponents: profitability. The evidence that profits drive investment is now well documented. "
>
> and,
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> "Recognise the close connection between past profitability and future expectations of profit on investment . . . . "
>
> and back to
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> "And in my book,The Great Recession, even I managed to present evidence for profits driving investment. This is ignored by neoclassical and Keynesian economics alike."
>
> So which is it, do "profits" or "future expectations of profit" drive investment? They seem to me to be two entirely different things - the difference between supply-side and demand-side, maybe?
Keynes is all about expectations of profit driving investment. Maybe contemporary Keynesians forget that, but it's seriously unfair to Keynes to suggest otherwise.
Also, profits are very high and investment isn't. I had it out with Roberts over this issue, but he pulls that old Marxist trick of adjusting profits until they say what you want them to. Corporate America has been bathing in a rich free cash flow for the last three years (free cash flow = profits less capital expenditures), and shipping out a lot of it to shareholders via dividends, takeovers, and buybacks.
Doug